This application examines the process by which aging individuals in need of long-term care are allocated to nursing homes and the implications of the selection process for the evaluation of the effects of individual and nursing home characteristics on health transition and aging in nursing home resents. Recently developed models of endogenous household residence that identify the consumption of residence-specific public goods as an important factor underlying the formation and stability of households will be adapted to study the market for long-term facilities. Because econometric analysis using this type of model requires detailed information on the choice sets available to both nursing homes and potential residents, the investigators will make primary use of data sets derived from detailed administrative records that provide longitudinal information on all residents and nursing homes in five states (New York, Mississippi, Kansas, South Dakota, and Maine). These states are participating in the Health Care Financing Administration's (HCFA) Case-Mix and Quality Demonstration. Information on residents and new entrants is contained in the Resident Assessment Instrument (RAI) and Minimum Data Set (MDS). These data will be merged with HCFA's Online Survey and Certification Automated Record (OSCAR) file that contains all Medicare/Medicaid certified nursing home facilities in the US. The analysis will be supplemented with data from the National Long- Term Care Survey in order to address potential selection issues arising form the entry of patients into the market for nursing-home care. Research during the application period will consist of data cleaning, methodological advancement, and preliminary analysis relevant to the development of an R01 application.